IBM to split into two as it reinvents itself

International Business Machines (IBM) has announced that it will split into two listed companies.
International Business Machines (IBM) has announced that it will split into two listed companies.
The move is an attempt to shift its focus to higher margin companies like cloud computing and artificial intelligence.
A new company focusing on legacy IT infrastructures will be named and spun off next year.
IBM shares closed nearly 6% higher after the announcement.
It is the latest shift in the world's first major computer company to break away from its traditional businesses.
"We sold the network back in the 1990s, we sold PCs in the 2000s, we sold semiconductors about five years ago because not all of them were included in the integrated value proposition," said managing director Arvind Krishna.
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Mr Krishna was the principal architect behind IBM's acquisition of cloud company Red Hat last year for $ 34 billion (£ 26 billion).
Amazon Web Services and Microsoft currently dominate the cloud services market.
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“To drive growth, our strategy must be rooted in the reality of the world we live in and in the future of our customers. These days, hybrid cloud and AI are fast becoming the place of commerce, of transactions and, over time, of computing itself, ”wrote Krishna in a blog post.
IBM, which currently employs more than 352,000 people, estimates the split will cost $ 5 billion.
Everything NewCo
IBM's previous business will be spun off into a new company called NewCo. This includes the “Managed Infrastructure Services” division.
Analysts said the move is an attempt to focus on more profitable business models.
"Essentially, given the cannibalizing effects of automation and the cloud, IBM is getting rid of a shrinking, low-margin operation and masks stronger growth for the rest of the operation," said Mosb Katri, an analyst at Wedbush Securities.
Mr. Arvind said NewCo would have annual sales of $ 19 billion and serve 75% of Fortune 100 companies on its IPO.
NewCo will have 90,000 employees and will be given a permanent name and public listing next year.

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